BAE/EADS deal collapse: full reaction

The government needs to 'send a powerful message that it backs British manufacturing and BAE Systems,' said Unite. Photograph: David Moir/Reuters

The BAE/EADS deal would have created the world's largest defence, security and aerospace group with sales of £60bn a year and a global workforce of 220,000.

Britain's largest union, Unite, urged the UK government to strengthen its 'golden share' in BAE Systems by taking an active stake in the company to safeguard jobs and boost manufacturing.

"The highly skilled workforces of both companies are the beating heart of British manufacturing," said Ian Waddell, Unite national officer for aerospace and shipbuilding. "A merger, with a jobs guarantee, would have created a strong new company that could have protected the UK's long-term interests.

"There was an industrial logic to the merger, but national and political interests proved to be the stumbling block. The UK government now needs to strengthen its 'golden share' and send a powerful message that it backs British manufacturing and BAE Systems.

"Short-termism cannot be allowed to govern BAE's future. BAE management in the past has made some crucial wrong decisions, such as selling its stake in Airbus in 2006. We need to ensure the company plans for the long term and that short-term investor pressure is balanced with employee representation on the board.

"BAE is a great British company. The government needs to follow the example of Germany and France where they pursue an active industrial policy and adopt an approach that safeguards the highly skilled jobs which are critical to our country's defence."

Chuka Umunna, the shadow business secretary, said: "Ministers have abandoned the approach which Labour adopted in government which was designed to give certainty to prime contractors and supply chains. We need ministers to work strategically with the defence sector to support industrial capacity and secure employment.

"For this to happen, the government needs to adopt a proper defence industrial strategy, giving industry greater certainty over sovereign capabilities, ensuring programmes run to time and cost and professionalising procurement within the MOD."

"Now that the answer to the future of UK defence manufacturing cannot be found in France and Germany it must lie in Britain and other established markets.

"Those Conservative MPs who were warning against the involvement of French and German governments must now demand a more active industrial strategy from the British government.

"There will be huge worry and uncertainty about the future of defence jobs, thousands of which have already been lost. Ministers must urgently convene talks with industry to develop a fresh defence industrial plan to give certainty to companies and workers."

Wyre & Preston North MPBen Wallace, who organised 45 fellow MPs to sign a joint letter to the prime minister seeking stronger safeguards in the deal, said: "I am pleased that the reality has hit home with BAE senior management. While the CEO of EADS had all good intentions he was never going to be able to throw the yoke of French and German political interference off his back. As long as those two squabbling government shareholders were present the deal should never have been promoted. Leopards don't change their spots and it was clear to me from the outset that British jobs were at risk.

"The BAE board should now reflect long and hard at what their strategic error could mean for the company's future. If they have put at risk my constituents' jobs and fatally wounded the UK's jewel in the manufacturing crown, then they should consider their position. BAE and its workers is a world leader in aerospace. It has a great future and it does not deserve, through inconsistent and unrealistic strategy, to be put at risk by such leadership."

Zafar Khan, an analyst at Société Générale, said: "I would have thought that they would have gone for an extension [from the takeover regulators] but clearly Germany must have dug in their heels for them just to call it a day at this stage.

"I take this as very good news as I didn't think this was a very good deal. I think it should be a huge sigh of relief for EADS shareholders."

Etienne de Durand, of the IFRI thinktank, said: "Given the overall context it does not surprise me this failed – it was always going to be a risky project. Franco-German relations were already difficult because on the big issue, notably management of the eurozone crisis, the two sides don't see eye to eye either on the timing or the substance.

"We see of course that it is Germany that has leadership on political and economic questions in Europe. France is in the pilot's cabin but it has not got its hand on the wheel. And that creates difficulties.

"The impression you get is that on neither side of the Rhine were politicians very happy with the EADS-BAE tie-up. It seemed to both sides as if they were being taken for a ride by the other."

Guy Anderson, senior analyst with IHS Jane's, said: "There will almost certainly be greater pressure on BAE Systems than EADS to reveal a plan B strategy as soon as possible.

"BAE Systems is better placed than many of its contemporaries in terms of margins and global reach, but the EADS merger talks mean the company has put itself firmly out on the field in terms of merger discussions and strategic direction.

"Investors are unlikely to be satisfied with business as usual. The continuation of BAE Systems' strategy of divesting non-core assets appears likely, although circumstances may call for something greater than the low key approach taken so far."

Sign up for the Guardian Today

Our editors' picks for the day's top news and commentary delivered to your inbox each morning.